SEC's Munter Calls for Auditor Attitude Adjustment

Speech by SEC's Paul Munter: The Auditor’s Responsibility for Fraud Detection

Auditors serve an important gatekeeping and investor protection function by helping to verify that issues are promptly identified and addressed so that the auditor has obtained reasonable assurance about whether financial statements are free of material misstatement, whether due to error or fraud. The value of the audit and the related benefits to investors, including investor protections, are diminished if the audit is conducted without the appropriate levels of due professional care and professional skepticism. Therefore, we remind auditors to fulfill their professional responsibilities by applying an appropriate fraud lens throughout the audit, including understanding the relationship between PCAOB AS 2401 and other auditing standards as it relates to identifying and responding to the risk of fraud in the audit so that the auditor has obtained reasonable assurance that there is not a material misstatement to the financial statements caused either by fraud or error.

SEC scrutiny into Wall Street communications shifts to investment funds – sources

The SEC’s enforcement unit has sent inquiries to a number of funds and advisers asking for information about their protocols for so-called “off-channel” business communications as recently as last week, the four sources told Reuters. The agency has asked firms to preserve and produce documents and share information on policies related to the use of devices and platforms, the sources said, speaking on condition of anonymity.

The regulatory agency has also asked for details on the firms’ organizational charts and past violations and remediation efforts, two of the sources said.

Details of the investigative “sweep” have not previously been reported. A spokesperson for the SEC declined to comment, saying: “We don’t comment on the existence or nonexistence of a possible investigation.”

Nevada Business Court Makes Lawyer Who “happened to wander into the courtroom today” Co-CEO of Public Company

How did Mr. Miller get picked for this role? A transcript of the relatively brief hearing reveals that the idea was pitched to the Court by one of Farnsworth’s attorneys. As the attorney explained it “my proposal is going to be that Mr. Colucci, Lisa King, and then, a third-party, who just happened to wander in the courtroom today, because he was a witness in the case next door, Mr. Ross Miller, be appointed as co-CEO.” The attorney then revealed that he had “vetted Mr. Miller. He said he’ll do it. He used to be the Secretary of State of Nevada. If you remember, his father was the governor for 10 years not even 8, but 10 years. And he does do corporate law. And he says he’s interested in it. So we’re going to propose him as the co-CEO.”

From the transcript, I gather that the Court thought this structure preferable to appointing a receiver. The Court stated that it knew “the receiver word, you know, it has a negative connotation.”

Mr. Miller became one of three co-CEOs on August 19th and then pursuant to a settlement agreement entered into on September 28th became the sole CEO of Vinco….

US SEC Investigates Bored-Ape’s Yuga Labs Unregistered Digital Assets Sales

The US Securities and Exchange Commission is investigating Yuga Labs Inc., the creator of the popular Bored Ape Yacht Club collection of NFTs, over whether sales of its digital assets violate federal law.

The SEC is examining whether certain nonfungible tokens from the Miami-based company are more akin to stocks and should follow the same disclosure rules, according to a person familiar with the matter, who asked not to be named because the probe is private. Wall Street’s main regulator is also examining the distribution of ApeCoin, which was given to holders of Bored Ape Yacht Club and related NFTs. The cryptocurrency was created in part for web3, a vision of a decentralized internet built around blockchains.

How the SEC Widens Net Over Ethereum

The fundamental problem with the SEC’s theory is its assumption that the relevant ETH transactions necessarily “took place in” the US just because blockchain nodes “are clustered more densely in the United States than in any other country.”

Although the Ethereum network nodes are primarily hosted using commercial hosting services, the network itself is not majority-located in any one country, nor does the US account for an absolute majority of total nodes worldwide.

The SEC’s jurisdictional allegations assume that, given that most nodes are US-based, it would be unlikely that any ETH transaction could be executed without at least some nodes being located in the US. But this is only an inference, and not necessarily a strong one.

Bittrex Fined $24 Million for Breaking U.S. Sanctions

The cryptocurrency exchange Bittrex was fined $24 million for breaking U.S. sanctions, the Treasury Department announced on Tuesday, the largest penalty the government has imposed on a crypto business for violating sanctions.

Between 2014 and 2017, Bittrex allowed customers in Cuba, Iran, Sudan, Syria and the Crimea region of Ukraine to make virtual currency transactions worth more than $263 million, according to the Treasury Department. The company, which is based in Bellevue, Wash., was fined an additional $5 million for breaking rules designed to prevent money laundering and other financial crimes, the government said.

Crypto Mixers Haven’t ‘Slowed’ DOJ Investigations, Director Says

While mixers and other automated tools cause challenges for the DOJ, they are not slowing investigators down, Choi added, responding to a question by moderator and conference organizer Chris Brummer.

The DOJ’s strategy around crypto in particular is focused on how tools might make facilitating crimes easier.

“We’re really looking at the multiplier effect, so mixers, tumblers and money laundering are important because they have a multiplier effect, they facilitate all sorts of criminal activities, different sorts,” she said. “By making sure that we are addressing … that activity, [we will] hopefully lessen the impact of crypto [crimes].”

Another part of the DOJ’s strategy involves its new Digital Asset Coordinator Network, which the entity announced in a recent report published as part of the White House’s executive order on crypto.

“That’s important for us just because there’s so much work to be done. We need to make sure we have available resourcing and subject matter experts on the ground and in the field in order to help their respective offices,” she said. “The team is very focused on just building [expertise].”

In SEC Lawsuit, Grayscale Calls Spot ETF Rejection ‘Arbitrary, Capricious, and Discriminatory’Grayscale Investments called the the U S. Securities and Exchange Commission’s (SEC) June decision to reject its application to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange traded fund (ETF) “arbitrary, capricious, and discriminatory” in an opening legal brief filed as part of its lawsuit against the regulator.

Grayscale filed suit against the SEC on June 29th, asking the U.S. Court of Appeals for the District of Columbia Circuit to review the regulator’s decision, which the SEC has published earlier in the day.